After a lot of questions, confusions and anticipations about the order of the Goods and Services Tax, especially on the auto industry, the government has finally come out with the figures. The bad news is that you will have to pay more if you are planning to buy a used car after 1st July 2017.
A higher tax structure will hugely impact the 3.87 million unit Indian second-hand car market. More than a quarter of new cars sold in the country are bought on exchange and that segment, too, could take a hit.
Talking in the laymen terms, Buyers today pay in the range of 0.5% - 14.5% VAT and Sales tax on used car in different states. However after the GST regime this rate will shoot up to 28%- 43% depending on the size of the car and the engine. This kind of a tax structure will increase the cost of second hand cars by Rs.5,000 - Rs 50,000 and will shoot up to Rs. 1 Lakh in the luxury cars.
The Tax before the GST is paid either on the selling price or the differential between the price the dealer bought the car and the price at which it is sold. However, under the GST it is likely that the cars will be applied on the differential amount only.
It is likely that this increase in the tax structure will move the second hand car buyers to turn to the unorganized and person to person car selling rather than the organized sector. This in turn will cut the revenue of the government.
